UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2021~~March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 000-54867

LGBTQ LOYALTY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

80-0671280

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2435 Dixie Highway, Wilton Manors, FL 33305

(Address of principal executive offices, including zip code)

Tel: (858)-577-1746

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if this registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August 16, 2021~~May 25, 2022 the Company had ~~682,553,402~~957,580,487 shares of common stock, $0.001 par value, issued and outstanding.

LGBTQ Loyalty Holdings, Inc.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2021~~MARCH 31, 2022

TABLE OF CONTENTS

		PAGE

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 3.	~~Quantitative and Qualitative Disclosures About Market Risk~~	24

~~Item~~ 4.	Controls and Procedures	2419

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	2620

Item 1A.	Risk Factors	2620

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2620

Item 3.	Defaults Upon Senior Securities	2720

Item 4.	Mine Safety Disclosures	2720

Item 5.	Other Information	2720

Item 6.	Exhibits	2720

	SIGNATURES	2821

LGBTQ Loyalty Holdings, Inc.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

	PAGE

Condensed Consolidated Balance Sheets as of ~~June 30, 2021~~March 31, 2022 (unaudited) and December 31, ~~2020 (unaudited)~~2021	2

Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020 (unaudited~~(unaudited))	3

Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (unaudited)	4

Condensed Consolidated Statements of Stockholders’ Deficit for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020 (unaudited~~(unaudited))	5

Notes to Condensed Consolidated Financial Statements (unaudited)	6

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30, December 31,
2021 2020
ASSETS
Current assets:
Cash $ 179,192 $ 30,312
Other receivables 305,000 100,000
Other current assets 6,925 20,983
Total current assets 491,117 151,295
Intangible assets, net 66,139 78,285
Total assets $ 557,256 $ 229,580

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 814,869 $ 920,569
Accrued salaries and consulting fees 468,719 605,857
Accrued interest and dividends 313,506 226,108
Notes payable 126,986 127,986
Notes payable to related party 1,800 17,885
Convertible notes payable, net of debt discount 1,897,277 1,661,520
Derivative liability on convertible notes payable 3,154,374 1,930,235
Series D preferred stock 577,356 -
Total liabilities 7,354,887 5,490,160

Commitments and contingencies

Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares authorized
Series A, 1 share designated, 0 shares issued or outstanding as of June 30, 2021 and December 31, 2020 - -
Series B, 500,000 shares designated, 50,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 50 50
Series C, 129,559 shares designated, 76,559 and 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 77 130
Series D, 1,000 shares designated, 550 and 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 1 -
Preferred stock value
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 669,390,677 and 263,725,234 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 669,389 263,725
Additional paid-in capital 11,721,866 7,714,704
Accumulated deficit (18,614,915 ) (13,239,189 )
Total stockholders’ equity (deficit) (6,797,631 ) (5,260,580 )
Total liabilities and stockholders’ equity (deficit) $ 557,256 $ 229,580

	March 31,			December 31,
	2022			2021
ASSETS
Current assets:
Cash	$	3,077		$	78,348
Prepaid expenses and other current assets		4,638			6,925
Total current assets		7,715			85,273
Intangible assets, net		46,795			53,243
Total assets	$	54,510		$	138,516

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	1,209,408		$	985,917
Accrued salaries and consulting fees		740,771			660,331
Accrued interest and dividends		759,789			640,153
Notes payable		126,986			126,986
Notes payable to related party		71,800			1,800
Convertible notes payable, net of debt discount		2,202,923			2,195,145
Derivative liability on convertible notes payable		1,757,315			1,398,127
Total liabilities		6,868,992			6,008,459

Commitments and contingencies		-			-

Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares authorized
Series A, 1 share designated, 0 shares issued or outstanding as of March 31, 2022 and December 31, 2021		-			-
Series B, 500,000 shares designated, 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021		-			-
Series C, 129,559 shares designated, 52,559 shares issued and outstanding as of March 31, 2022 and December 31, 2021		52			52
Series D, 2,000 shares designated, 1,005 and 1,050 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		1			1
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 912,068,287 and 832,719,287 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		912,068			832,719
Additional paid-in capital		12,897,856			13,215,129
Accumulated deficit		(20,624,459	)		(19,917,844	)
Total stockholders’ equity (deficit)		(6,814,482	)		(5,869,943	)
Total liabilities and stockholders’ equity (deficit)	$	54,510		$	138,516

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Revenue $ - $ - $ - $ 560
Cost of net revenue - - - -
Gross profit - - - 560

Operating expenses:
Personnel costs 93,121 284,507 1,389,121 499,462
Consulting fees 38,500 93,515 71,500 168,015
Legal and professional fees 153,527 95,347 258,650 222,342
Sales and marketing 40,500 45 40,500 7,590
General and administrative 28,392 20,736 56,514 70,728
Depreciation and amortization 6,448 6,448 12,896 12,896
Total operating expenses 360,488 500,598 1,829,181 981,033

Loss from operations (360,488 ) (500,598 ) (1,829,181 ) (980,473 )

Other income (expense):
Interest expense (727,642 ) (376,473 ) (1,289,328 ) (737,312 )
Other income - 3,000 - 3,000
Change in derivative liability (2,658,949 ) 442,626 (2,245,976 ) 324,872
Total other income (expense), net (3,386,591 ) 69,154 (3,535,304 ) (409,440 )

Provision for income taxes - - - -
Net loss $ (3,747,079 ) $ (431,445 ) $ (5,364,485 ) $ (1,389,913 )

Weighted average common shares outstanding -basic and diluted 553,901,386 190,052,683 432,821,915 187,427,874
Net loss per common share - basic and diluted $ (0.01 ) $ (0.00 ) $ (0.01 ) $ (0.01 )

	2022			2021
	Three Months Ended
	March 31,
	2022			2021
Revenue	$	-		$	-
Cost of net revenue		-			-
Gross profit		-			-

Operating expenses:
Personnel costs		113,994			1,295,998
Consulting fees		15,250			33,000
Legal and professional fees		156,793			105,123
Fund expenses		100,000			-
Sales and marketing		27,702			-
General and administrative		36,317			28,123
Depreciation and amortization		6,448			6,448
Total operating expenses		456,504			1,468,692

Loss from operations		(456,504	)		(1,468,692	)

Other income (expense):
Interest expense		(106,127	)		(561,687	)
Change in derivative liability		(359,188	)		412,974
Total other income (expense), net		(465,315	)		(148,713	)

Provision for income taxes		-			-
Net loss	$	(921,819	)	$	(1,617,405	)

Weighted average common shares outstanding - basic and diluted		882,320,409			279,934,215
Net loss per common share - basic and diluted	$	(0.001	)	$	(0.01	)

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended
June 30,
2021 2020
Cash flows from operating activities:
Net loss $ (5,364,485 ) $ (1,389,913 )
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and original issue discount 704,007 403,267
Change in fair value of derivative liability 2,245,976 (324,872 )
Financing related costs - debt 460,780 257,158
Stock-based compensation expense 1,218,114 213,276
Depreciation and amortization 12,896 12,896
Changes in operating assets and liabilities:
Other current assets 14,058 -
Bank overdraft
-

1,279

Accounts payable (105,699 ) 89,514
Accrued salaries and consulting fees 201,470 304,115
Accrued interest and dividends 93,663 60,250
Net cash used in operating activities (519,220 ) (373,030 )
Cash flows from investing activities:
Other receivables (205,000 ) -
Investment in intangible assets - (31,000 )
Net cash used in investing activities (205,000 ) (31,000 )
Cash flows from financing activities:
Proceeds from issuance of convertible debenture agreements 300,000 250,000
Net proceeds (repayments) from promissory note agreements (1,000 ) 47,500
Proceeds from issuance of Series D preferred stock 574,100 -
Proceeds from exercise of warrants - 93,342
Net cash provided by financing activities 873,100 390,842
Net increase (decrease) in cash 148,880 (13,888 )
Cash at beginning of period 30,312 13,188
Cash at end of period $ 179,192 $ -

Supplemental disclosure of cash flow information:
Cash paid for income taxes $ - $ -
Cash paid for interest $ - $ 12,500

Supplemental disclosure of non-cash financing activities:
Conversion of accrued consulting fees into common shares $ 338,608 $ 617,750
Conversion of related party notes payable into common shares $ 16,085 $ -
Conversion of Series C preferred stock into common stock $ 53,000 $ -
Exercise of common stock warrants - derivative liability $ - $ 32,742
Amortization of preferred stock discount $ - $ 31,820
Dividends on preferred stock $ 11,241 $ 10,400

	2022			2021
	Three Months Ended
	March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(921,819	)	$	(1,617,405	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount and original issue discount		7,778			243,045
Change in fair value of derivative liability		359,188			(412,974	)
Financing related costs - debt		-			264,460
Stock-based compensation expense		-			1,218,114
Depreciation and amortization		6,448			6,448
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		2,287			2,686
Accounts payable		223,491			58,287
Accrued salaries and consulting fees		80,440			24,333
Accrued interest and dividends		96,916			53,750
Net cash used in operating activities		(145,271	)		(159,256	)
Cash flows from investing activities:
Other receivables		-			-
Investment in intangible assets		-			-
Net cash used in investing activities		-			-
Cash flows from financing activities:
Net proceeds (repayments) from promissory note agreements		70,000			(500	)
Proceeds from issuance of convertible debenture agreements		-			150,000
Net cash provided by financing activities		70,000			149,500
Net decrease in cash		(75,271	)		(9,756	)
Cash at beginning of period		78,348			30,312
Cash at end of period	$	3,077		$	20,556

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	-		$	-

Supplemental disclosure of non-cash financing activities:
Conversion of accrued consulting fees into common shares	$	-		$	138,334
Dividends on preferred stock	$	22,720		$	1,722
Exercise of common stock warrants	$	43,349		$	61,775
Conversion of Series D preferred stock for common stock	$	54,000		$	-
Deemed dividend on conversion of preferred stock	$	237,924		$	-

See the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

Preferred Stock Additional Total
Series A Series B Series C Series D Common Stock Paid-in Accumulated Stockholders’
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit

Balances at December 31, 2020 - $ - 50,000 $ 50 129,559 $ 130 - $ - 263,725,234 $ 263,725 7,714,704 $ (13,239,189 ) $ (5,260,580 )
Common shares issued in connection with notes payable
Common shares issued in connection with notes payable, shares
Common shares issued for accrued services
Common shares issued for accrued services, shares
Common shares issued to board of directors - - - - - - - - 140,000,000 140,000 980,000 - 1,120,000
Common shares issued for services and compensation - - - - - - - - 31,834,386 31,834 204,614 - 236,448
Debenture conversions - - - - - - - - 37,538,998 37,539 318,815 - 356,354
Conversion of notes and payables
Conversion of notes and payables, shares
Exercise of warrants
Exercise of warrants, shares
Conversion of Series C preferred stock into common stock
Conversion of Series C preferred stock into common stock, shares
Exercise of common stock warrants
Exercise of common stock warrants, shares
Exercise of stock options
Exercise of stock options, shares
Conversion of Series B preferred stock for common shares
Conversion of Series B preferred stock for common shares, shares
Issuance of Series B dividend common shares
Issuance of Series B dividend common shares, shares
Amortization of preferred stock discount
Dividends on preferred stock - - - - - - - - - - - (1,722 ) (1,722 )
Net loss - - - - - - - - - - - (1,617,405 ) (1,617,405 )
Balances at March 31, 2021 - $ - 50,000 $ 50 129,559 $ 130 - $ - 473,098,618 $ 473,098 9,218,133 $ (14,858,316 ) $ (5,166,906 )
Debenture conversions - - - - - - - - 100,448,779 100,449 1,821,061 - 1,921,510
Conversion of notes and payables - - - - - - - - 11,956,004 11,956 192,408 - 204,364
Exercise of warrants - - - - - - 30,887,276 30,887 (30,887 ) - -
Conversion of Series C preferred stock into common stock - - - - (53,000 ) (53 ) - - 53,000,000 53,000 (52,947 ) - -
Dividends on preferred stock - - - - - - - - - - - (9,519 ) (9,519 )
Net loss - - - - - - - - - - - (3,747,079 ) (3,747,079 )
Balances at June 30, 2021 - $ - 50,000 $ 50 76,559 $ 77 550 $ 1 669,390,677 $ 669,390 $ 11,147,767 $ (18,614,915 ) $ (6,797,631 )

Balances at December 31, 2019 - $ - 75,000 $ 75 129,559 $ 130 - $ - 169,217,460 $ 169,217 6,035,547 $ (9,077,614 ) $ (2,872,645 )
Common shares issued in connection with notes payable - - - - - - - - 294,994 295 9,705 - 10,000
Common shares issued for accrued services - - - - - - - - 6,662,312 6,662 311,338 - 318,000
Common shares issued to board of directors - - - - - - - - 1,000,000 1,000 16,800 - 17,800
Exercise of common stock warrants - - - - - - - - 4,170,000 4,170 121,914 - 126,084
Amortization of preferred stock discount - - - - - - - - - - 15,910 (15,910 ) -
Dividends on preferred stock - - - - - - - - - - - (2,588 ) (2,588 )
Net loss - - - - - - - - - - - (958,468 ) (958,468 )
Balances at March 31, 2020 - $ - 75,000 $ 75 129,559 $ 130 - $ - 181,344,766 $ 181,344 6,511,211 $ (10,054,580 ) $ (3,361,820 )
Beginning balance - $ - 75,000 $ 75 129,559 $ 130 - $ - 181,344,766 $ 181,344 6,511,211 $ (10,054,580 ) $ (3,361,820 )
Common shares issued to board of directors - - - - - - - - 11,942,161 11,942 202,652 - 214,595
Common shares issued for services and compensation - - - - - - - - 16,279,273 16,279 264,353 - 280,632
Exercise of stock options - - - - - - - - 4,000,000 4,000 6,400 - 10,400
Conversion of Series B preferred stock for common shares - - (25,000 ) (25 ) - - - - 958,333 958 (933 ) - -
Issuance of Series B dividend common shares - - - - - - - - 90,216 90 3,360 - 3,450
Amortization of preferred stock discount - - - - - - - - - - 15,910 (15,910 ) -
Dividends on preferred stock - - - - - - - - - - - (1,725 ) (1,725 )
Net loss - - - - - - - - - - - (431,445 ) (431,445 )
Balances at June 30, 2020 - $ - 50,000 $ 50 129,559 $ 130 - $ - 214,614,749 $ 214,615 $ 7,002,953 $ (10,503,660 ) $ (3,285,912 )
Ending Balance - $ - 50,000 $ 50 129,559 $ 130 - $ - 214,614,749 $ 214,615 $ 7,002,953 $ (10,503,660 ) $ (3,285,912 )

	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount		Shares		Amount		Capital			Deficit			Deficit
	Preferred Stock																					Additional						Total
	Series A				Series B				Series C				Series D					Common Stock				Paid-in			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount		Shares		Amount		Capital			Deficit			Deficit

Balances at December 31, 2020		-	$	-		50,000	$	50		129,559	$	130		-			-		263,725,234	$	263,725	$	7,714,704		$	(13,239,189	)	$	(5,260,580	)
Common shares issued to board of directors		-		-		-		-		-		-		-			-		140,000,000		140,000		980,000			-			1,120,000
Common shares issued for services and compensation		-		-		-		-		-		-		-			-		31,834,386		31,834		204,614			-			236,448
Debenture conversions		-		-		-		-		-		-		-			-		37,538,998		37,539		318,815			-			356,354
Dividends on preferred stock		-		-		-		-		-		-		-			-		-		-		-			(1,722	)		(1,722	)
Net loss		-		-		-		-		-		-		-			-		-		-		-			(1,617,405	)		(1,617,405	)
Balances at March 31, 2021		-	$	-		50,000	$	50		129,559	$	130		-		$	-		473,098,618	$	473,098	$	9,218,133		$	(14,858,316	)	$	(5,166,906	)

Balances at December 31, 2021		-	$	-		-	$	-		51,559	$	52		1,050		$	1		832,719,287	$	832,719	$	13,215,129		$	(19,917,844	)	$	(5,869,943	)
Exercise of warrants		-		-		-		-		-		-		-			-		43,349,000		43,349		(43,349	)		-			-
Conversion of Series D preferred stock for common stock		-		-		-		-		-		-		(45	)		-		36,000,000		36,000		(36,000	)		-			-
Deemed dividend on conversion of preferred stock		-		-		-		-		-		-		-			-		-		-		(237,924	)		237,924			-
Dividends on preferred stock		-		-		-		-		-		-		-			-		-		-		-			(22,720	)		(22,720	)
Net loss		-		-		-		-		-		-		-			-		-		-		-			(921,819	)		(921,819	)
Balances at March 31, 2022		-	$	-		-	$	-		51,559	$	52		1,005		$	1		912,068,287	$	912,068	$	12,897,856		$	(20,624,459	)	$	(6,814,482	)

SeeSee the accompanying notes to the unaudited condensed consolidated financial statements

LGBTQ LOYALTY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~June 30, 2021~~March 31, 2022

Note 1. Nature of Business

Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to LGBTQ Loyalty Holdings, Inc. (formerly LifeApps Brands Inc.), including its subsidiaries.

On January 25, 2019, we acquired LGBT Loyalty LLC, a New York limited liability company, with the goal of creating the first LGBTQ Loyalty Preference Index ETF (the “Index ETF”) to provide the LGBTQ community with the power to influence the allocation of capital within a financial Index ETF based upon LGBTQ consumer preferences. The Index ETF is intended to link the growing economic influence of the LGBTQ community and their allies with many of the top Fortune 500 companies that support and implement diversity, inclusion and equality policies within their organizations. The incorporation of diversity and inclusion in a company’s recruitment and human resource policies ~~is becoming~~has become a key concern to investors as part of their growing focus on ESG allocations. Our data and analytics unequivocally reinforce that corporations that have embraced diversity and inclusion policies within their corporate culture perform at a higher level financially than their peers. This includes advancing a more invigorated workforce that attracts and retains the best talent. Innovation and agility have been identified as great benefits of diversity, and there is an increasing awareness of what has ~~come to be~~become known as ‘the power of difference’.

On October 30, 2019, through our wholly-owned subsidiary Loyalty Preference Index, Inc. (“LPI”) and our strategically aligned partnerships with ~~crowd sourced~~crowd-sourced data and analytic providers, we launched the LGBTQ100 ESG Index. This Index ~~which~~ integrates LGBTQ community survey data into the methodology for a benchmark listing of the nation’s highest financially performing large-cap publicly listed corporations that our respondents believe are most committed to advancing equality. LPI is the index provider for the LGBTQ + ESG100 ETF; LGBTQ Loyalty was the Sponsor for the prospectus that was filed by the licensed Fund Adviser ProcureAM, and was approved by the Securities and Exchange Commission (“SEC”) in early January 2020. The LGBTQ + ESG100 ETF (the “Fund”) ~~launched in May 2021 on the NASDAQ. The Fund~~ seeks to track the investment results (before fees and expenses) of the LGBTQ100 ESG ~~Index and earns management fees based on assets under management (“AUM”).~~

Index. In late 2020, LPI was renamed to Advancing Equality Preference, Inc.

On March 25, 2022, ProcureAM, LLC (“Adviser”), the adviser to the Fund, after consultation with the Company, the sponsor of the ETF, determined that the Fund should be closed. Based upon a recommendation by the Adviser, the Board of Trustees of Procure ETF Trust I (the “Trust”) has approved a Plan of Liquidation for the Fund under which the Fund will be liquidated on or about April 28, 2022 (the “Liquidation Date”). The Liquidation Date may be changed without notice at the discretion of the officers of the Trust. Beginning when the Fund commences the liquidation of its portfolio, the Fund will not pursue its investment objectives or, with certain exceptions, engage in normal business activities, and the Fund may hold cash and securities that may not be consistent with the Fund’s investment objective and strategy, which may adversely affect Fund performance.

Note 2. Summary of Significant Accounting Policies

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”), which contemplates our continuation as a going concern. We have incurred losses to date of $~~18,614,915~~20,624,459 and have negative working capital of $~~6,863,770~~6,861,277 as of ~~June 30, 2021.~~March 31, 2022. To date we have funded our operations through advances from a related party, ~~issuance~~issuances of convertible debt, and the sale of ~~our~~ common ~~stock.~~stock, preferred stock and warrants. We intend to raise additional funding through ~~third party~~third-party equity or debt financing. There is no certainty that funding will be available as needed. These factors raise substantial doubt about our ability to continue operating as a going concern. Our ability to continue our operations as a going concern, realize the carrying value of our assets, and discharge our liabilities in the normal course of business is dependent upon our ability to raise capital sufficient to fund our commitments and ongoing losses, and ultimately generate profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Basis of Presentation

We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These condensed consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for fiscal year ~~2021.~~2022. Certain information and footnote disclosures normally included in unaudited condensed consolidated financial statements prepared in accordance with US GAAP have been omitted in accordance with the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, ~~2020~~2021 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

Prior Period Adjustments

In the first quarter of 2022, we determined that the Series D preferred stock included a substantive conversion option, and therefore should be equity classified. Previously, the amount was included as a current liability. We have reclassified the amount to Series D preferred stock equity and additional paid-in capital on the consolidated balance sheet and consolidated statement of stockholders’ equity as of December 31, 2021. We do not believe the change to be qualitatively material to the consolidated financial statements as of December 31, 2021.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, LGBTQ Loyalty, LLC, and Advancing Equality Preference, Inc. All material inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ from these estimates.

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.

Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.

Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights and derivative liabilities.

Our financial instruments consist of cash, other current assets, accounts payables, accruals, and notes payable. The carrying values of these instruments approximate fair value because of the short-term maturities. The fair value of the Company’s convertible debentures and promissory notes approximates their carrying values as the underlying imputed interest rates approximates the estimated current market rate for similar instruments. The derivative is measured as a Level 3 instrument due to the various inputs which requires significant management judgment. Refer to Note 6 for detail.

The following table is a summary of our financial instruments measured at fair value:

Schedule of Financial Instruments at Fair Value

	Fair Value Measurements								Fair Value Measurements
	as of June 30, 2021:								as of March 31, 2022:
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liability on convertible notes payable	$	-	$	-	$	3,154,374	$	3,154,374	$	-	$	-	$	1,757,315	$	1,757,315
	$	-	$	-	$	3,154,374	$	3,154,374	$	-	$	-	$	1,757,315	$	1,757,315

	Fair Value Measurements								Fair Value Measurements
	as of December 31, 2020:								as of December 31, 2021:
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liability on convertible notes payable	$	-	$	-	$	1,930,235	$	1,930,235	$	-	$	-	$	1,398,127	$	1,398,127
	$	-	$	-	$	1,930,235	$	1,930,235
									$	-	$	-	$	1,398,127	$	1,398,127

~~Other Receivables – Related Party~~

~~Other receivables represent amounts held in escrow at the Fund’s custodian. In the second quarter of 2021, the Company retrieved $100,000from the Fund’s custodian, and provided $305,000~~ ~~related to the ETF launch. As of June 30, 2021, $305,000was in escrow.~~

Earnings per Share

We calculate earnings per share in accordance with ASC Topic 260 Earnings Per Share, which requires a dual presentation of basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding during the fiscal year. Diluted earnings per share represent basic earnings per share adjusted to include the potentially dilutive effect of outstanding stock options and warrants. The diluted earnings per share were not calculated because we recorded net losses for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and the outstanding stock options and warrants are anti-dilutive. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the following number of potentially dilutive shares have been excluded from diluted net loss since such inclusion would be anti-dilutive:

Schedule of Anti-dilutive Securities Excluded from Diluted Net Loss

	Six Months Ended				2022		2021
	June 30,				Three Months Ended
	2021		2020		March 31,
Series D preferred stock		67,826		-
					2022		2021
Stock options outstanding		1,800,000		1,800,000		-		1,800,000
Warrants		204,946,057		-		130,709,782		235,833,333
Shares to be issued upon conversion of notes		203,651,096		173,870,349
		410,464,979		175,670,349
Shares to be issued upon conversion of notes and Series D preferred stock						3,919,792,222		372,689,648
Anti-dilutive securities						4,050,502,004		610,322,981

Recent Pronouncements

~~Recent Pronouncements~~In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company has elected to early adopt this ASU in the first quarter of 2022 and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

Note 3. Intangible Assets

The Company capitalizes costs pertaining to the development of the LGBTQ100 ESG Index website. The Company began amortizing these costs upon the launch of the index, and will amortize the costs over a three-year useful life.

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, net intangible assets ~~net was~~were $~~66,139~~ 46,795and $~~78,285~~53,243, respectively. Amortization expense was $6,448~~and $12,895~~ for both the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Note 4. Notes Payable

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company has a note payable outstanding in the amount of $1,986~~and $2,986, respectively.~~. The note is past due at ~~June 30, 2021~~March 31, 2022 and is, therefore, in default. The note accrues interest at a rate of 2% 2% per annum. ~~During the six months ended June 30, 2021, the Company repaid $1,000~~ ~~pertaining to this note.~~

In December 2019, the Company issued a promissory note to Pride Partners LLC (“Pride”) for $75,000. The note is secured, accrues interest at a rate of ~~10%~~10% per annum, and matured on June 20, ~~2020~~.2020. As of ~~June 30, 2021,~~March 31, 2022, the full principal amount was outstanding and in default.

In 2019, the Company issued a promissory note for $50,000. The note includes $2,500 in original issue discount. The noted is unsecured and matured in December 2019. As of March 31, 2022, the full principal amount was outstanding an in default.

Note 5. Convertible Notes Payable

On January 21, 2021, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd (“Power Up January 2021 Note”). Pursuant to the terms of the Power Up January 2021 Note, the lender agreed to purchase from the Company, for a purchase price of $~~75,000, a~~ ~~10%~~ ~~convertible note in the principal amount of $86,350. The Power Up January 2021 Note matures and becomes due and payable on~~ ~~March 5, 2022~~ ~~and accrues interest at a rate of 10% per annum. The Power Up January 2021 Note, plus all accrued but unpaid interest, may be prepaid at any time prior to the maturity date.~~

The Power Up January 2021 Note is convertible into shares of the Company’s common stock at any time at a conversion price (the “Conversion Price”), which shall equal the Variable Conversion Price. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price, which is the lowest Trading Price for the common stock during the twenty (20~~) trading day period ending on the latest complete trading day prior to the conversion date.~~ ~~The conversion price is subject to customary adjustments. The conversion price is not subject to a floor.~~

On March 5, 2021, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd (“Power Up March 2021 Note”). Pursuant to the terms of the Power Up March 2021 Note, the lender agreed to purchase from the Company, for a purchase price of $~~75,000, a~~ ~~10%~~ ~~convertible note in the principal amount of $86,350. The Power Up March 2021 Note matures and becomes due and payable on~~ ~~March 5, 2022~~ ~~and accrues interest at a rate of 10% per annum. The Power Up March 2021 Note, plus all accrued but unpaid interest, may be prepaid at any time prior to the maturity date.~~

The Power Up March 2021 Note is convertible into shares of the Company’s common stock at any time at a conversion price (the “Conversion Price”), which shall equal the Variable Conversion Price. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price, which is the lowest Trading Price for the common stock during the twenty (20~~) trading day period ending on the latest complete trading day prior to the conversion date.~~ ~~The conversion price is subject to customary adjustments. The conversion price is not subject to a floor.~~

On May 4, 2021, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd (“Power Up May 2021 Note”). Pursuant to the terms of the Power Up 2021 Note, the lender agreed to purchase from the Company, for a purchase price of $~~150,000, a~~ ~~10%~~ ~~convertible note in the principal amount of $169,125. The Power Up 2021 Note matures and becomes due and payable on~~ ~~May 4, 2022~~ ~~and accrues interest at a rate of 10% per annum. The Power Up May 2021 Note, plus all accrued but unpaid interest, may be prepaid at any time prior to the maturity date.~~

The Power Up May 2021 Note is convertible into shares of the Company’s common stock at any time at a conversion price (the “Conversion Price”), which shall equal the Variable Conversion Price. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price, which is the lowest Trading Price for the common stock during the twenty (20~~) trading day period ending on the latest complete trading day prior to the conversion date.~~ ~~The conversion price is subject to customary adjustments. The conversion price is not subject to a floor.~~

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, the Company recorded amortization of debt discount and original issue discount of $~~364,877~~ 7,778and $~~582,631~~217,754~~, respectively, for all convertible debentures. During the three and six months ended June 30, 2020, the Company recorded amortization of debt discount and original discount of $201,028~~ ~~and $403,267~~, respectively, for all convertible debentures. This amount is included in interest expense in our consolidated statements of operations.

The following is a summary of the activity of the convertible notes payable and convertible debenture for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

~~Summary of Activity~~Schedule of Convertible Notes Payable and Convertible ~~Debenture~~Debentures Activity

Convertible
Debenture
Balance as of December 31, 2020 $ 1,661,520
Issuance of convertible debenture - principal amount 341,825
Issuance of convertible debenture - debt discount and original issue discount (341,825 )
Amortization of debt discount and original issue discount 582,631
Conversion to common stock, net of discount (346,874 )
Balance as of June 30, 2021 $ 1,897,277

	Convertible
	Debenture
Balance as of December 31, 2021	$	2,195,145
Amortization of debt discount and original issue discount		7,778
Balance as of March 31, 2022	$	2,202,923

The following comprises the balance of the convertible debenture outstanding at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

Schedule of ~~Balance~~ Convertible Debenture Outstanding

	June 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
Principal amount outstanding	$	2,304,602		$	2,458,024		$	2,221,027		$	2,221,027
Less: Unamortized original issue discount		(55,271	)		(94,857	)		(18,104	)		(25,882	)
Less: Unamortized debt discount		(352,053	)		(701,647	)
Convertible note payable, net of debt discount	$	1,897,277		$	1,661,520
Total							$	2,202,923		$	2,195,145

1110

AtAs of March 31, 2022 and December 31, ~~2020, convertible notes payable includes a balance of $615,134~~ ~~pertaining to a parity default penalty booked in 2020. The~~2021, the EMA Note ~~has an original principal~~was in default and the parity value of the EMA Note was determined to be $~~85,000~~434,687. In 2021, the ~~second quarter of 2021, EMA converted $~~Company issued ~~180,447~~60,714,000 ~~in principal for~~ shares of common stock ~~with an~~pursuant to conversions of outstanding ~~principal balance of $434,687~~ as of June 30, 2021. The Company is currently settling the remaining note into shares and warrants to be issued to EMA, and expects the ultimate value to be less than the stated balance included in the consolidated balance sheet.principal.

Note 6. Derivative Liability

We evaluated the terms of the conversion features of ~~each of~~ the ~~outstanding convertible~~ debentures and related debenture warrants as noted above and below, in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and determined they are indexed to the Company’s common stock and that the conversion features meet the definition of a liability. Therefore, we bifurcated the conversion feature and accounted for it as a separate derivative liability.

To determine the fair value of our embedded derivatives, management evaluates assumptions regarding the probability of certain future events. Other factors used to determine fair value include our period end stock price, historical stock volatility, risk free interest rate and derivative term. The fair value recorded for the derivative liability varies from period to period. This variability may result in the actual derivative liability for a period either above or below the estimates recorded on our consolidated financial statements, resulting in significant fluctuations in other income (expense) because of the corresponding non-cash gain or loss recorded.

We value the conversion feature at origination of the notes using the Black-Scholes valuation ~~model.~~model with the below assumptions. We value the derivative liability at the end of each accounting period, and upon conversion of the underlying note or warrant, with the difference in value recognized as gain or loss included in other income (expense) in our consolidated statements of operations.

The original debentures had conversion features that resulted in derivative liabilities. We valued the conversion features at each origination date with the following assumptions, on a weighted-average basis:

Schedule of Conversion Feature of Derivative Liability

Six Months Ended
June 30,
2021 2020
Risk-free interest rate 0.09 % 0.78 %
Expected term (in years) 1.00 0.90
Expected volatility 237.4 % 161.9 %
Expected dividend yield 0 % 0 %
Exercise price of underlying common shares $ 0.004 $ 0.01

	Three Months Ended
	March 31,
	2022		2021
Risk-free interest rate		n/a		0.09	%
Expected term (in years)		n/a		1.00
Expected volatility		n/a		233.1	%
Expected dividend yield		n/a		0	%
Exercise price of underlying common shares		n/a	$	0.004

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the entire value of the principal of the debentures ~~were~~was assigned to the derivative liability and recognized as a debt ~~discount on the convertible debentures.~~discount. The debt discount is recorded as reduction (contra-liability) to the debentures and ~~are~~is being amortized over the initial term. ~~The~~Any excess balance ~~of $460,780~~ was recognized as origination interest on the derivative liability and expensed on origination. In accordance with the Company’s sequencing policy, shares issuable pursuant to the convertible debentures would be settled subsequent to the Company’s Series B preferred stock.

The following is a summary of the activity of the derivative liability for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

Schedule of Derivative Liability Activity

Derivative
Liability
Balance as of December 31, 2020 $ 1,930,235
Initial fair value on issuance of convertible debenture 760,740
Conversion of debenture to common stock (1,782,577 )
Change in fair value of derivative liability 2,245,976
Balance as of June 30, 2021 $ 3,154,374


	Debenture
Balance as of December 31, 2021	$	1,398,127
Change in fair value of derivative liability		359,188
Balance as of March 31, 2022	$	1,757,315

Note 7. Preferred Stock

Series D Convertible Preferred Stock

On April 8, 2021, the Company issued 400 shares of Series D Convertible Preferred Stock (the Series D Preferred Stock”) to GHS Investments, LLC (“GHS”) pursuant to a Securities Purchase Agreement (“GHS April Agreement”) for net proceeds of $427,600. In conjunction with the GHS Agreement, the Company issued warrants to purchase 40,000,000 shares of common stock at an exercise price of $0.001.

On May 12, 2021, the Company issued 150 shares of Series D Preferred Stock to GHS Investments, LLC pursuant to a Securities Purchase Agreement (“GHS May Agreement”) for net proceeds of $146,500. In conjunction with the GHS Agreement, the Company issued warrants to purchase 1,500,000 shares of common stock at an exercise price of $0.001.

~~Notwithstanding, on June 23,~~On July 14, 2021, ~~GHS and~~ the Company entered into a Rescission Agreement (the “Rescission Agreement”) pursuant to which the Company and GHS agreed to rescind, ab initio, the issuances of Warrants to GHS. Pursuant to the Rescission Agreement, GHS and the Company agreed that the issuance of the Warrants are unconditionally and irrevocably rescinded ab initio by GHS and the Company, and the Warrants are neither valid nor effective in any manner whatsoever. Further, GHS and the Company acknowledged that each has been restored to the position in which such party found itself on the date that the respective GHS Agreement was executed but without any references, rights or obligations relative to the Warrants contained in, or otherwise granted in, either the GHS Agreements or the Warrants. As a result, GHS has no rights whatsoever to the Warrants and the Company has no rights whatsoever to the any exercise price that it may have received pursuant to the Warrants. In connection with the execution and delivery of the Rescission Agreement, the Company and GHS entered into two (2) Amended and Restated Purchase Agreements which each seek to amend and restate the terms and conditions contained in the April Agreement and the May Agreement.issued 250

In connection with the issuance of the Series D Preferred Stock, on April 7, 2021 and May 12, 2021, we filed a Certificates of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Series D COD”) with the Delaware Secretary of State to create a new class of preferred stock, $~~0.001~~ ~~par value per share, designated Series D Convertible Preferred Stock and authorized the issuance of up to one thousand (1,000) shares of Series D Preferred Stock.~~

~~The Series D Preferred Stock has a stated value of $1,200~~ ~~per share (“Stated Value”) and the holder of the Series D Preferred Stock has the right to receive a dividend equal to eight percent (~~8%) per annum, payable quarterly, beginning on the issuance date of the Series D Preferred Stock and ending on the date that Series D Preferred Share has been converted or redeemed. Dividends may be paid in cash or in shares of Series D Preferred Stock ~~at the discretion of the Company. Further, the holders of the Series D Preferred Stock has the right~~ to ~~receive assets in the event of liquidation, dissolution or winding up before any distribution or payment shall be made~~GHS pursuant to ~~the holders of any securities junior to the Series D Preferred Stock.~~

~~The conversion price (the “Conversion Price”~~a Securities Purchase Agreement (“GHS July Agreement”) for net proceeds of $237,500. On August 20, 2021, the Series D Preferred Stock shall be $0.008109, equal to 90% of the average VWAP for the ten (10) Trading Days immediately preceding the date of the SPA. The Conversion Price will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock. Following an “Event of Default,” as defined in the SPA, the Conversion price shall equal the lower of: (a) the then applicable Conversion Price; or (b) a price per share equaling eighty percent (80%) of the lowest traded price for the Company’s common stock during the fifteen (15) Trading Days immediately preceding, but not including, the Conversion Date.Company issued 250

~~Each share~~ shares of Series D Preferred Stock ~~is convertible, at any time and from time~~ to ~~time, at the option of the holder thereof, into that number of shares of Common Stock (subject in each case~~GHS pursuant to a ~~4.99% beneficial ownership limitation) determined by dividing the Stated Value~~Securities Purchase Agreement (“GHS August Agreement”) for net proceeds of ~~such share of Series D Preferred Stock by the Series D Preferred Stock Conversion Price.~~$250,000

Additionally, the Company shall have the right to redeem (a “Corporation Redemption”), all (but not less than all), shares of the Series D Preferred Stock issued and outstanding at any time after the issuance date, upon five (5) business days’ notice, at a redemption price per Series D Preferred Stock then issued and outstanding (the “Corporation Redemption Price”), equal to the product of (i) the Premium Rate multiplied by (ii) the sum of (x) the Stated Value, (y) all accrued but unpaid dividends, and (z) all other amount due to the holder pursuant to the Series D COD and the SPA including, but not limited to late fees, liquidated damages and the legal fees and expenses of the holder’s counsel relating to the Series D COD and/or the SPA. “Premium Rate” means (a) 1.15 if all of the Series D Preferred Stock is redeemed within ninety (90) calendar days from the issuance date thereof; (b) 1.2 if all of the Series D Preferred Stock is redeemed after ninety (90) calendar days and within one hundred twenty (120) calendar days from the issuance date thereof; (c) 1.25 if all of the Series D Preferred Stock is redeemed after one hundred twenty (120) calendar days and within one hundred eighty (180) calendar days from the issuance date thereof; and (iv) each share of Series D Preferred Stock shall be redeemed on the date that is one (1) calendar year from the date of its issuance..

On the one-year anniversary of the date of issuance of the Preferred Stock, the Company must redeem the Preferred Stock then outstanding at a price equal to the outstanding Stated Value together with any accrued but unpaid dividends.

Pursuant to the Series D COD, we are required to reserve and keep available out of our authorized and unissued shares of Common Stock two times the number of Common Stock needed to convert or exercise all Series D Preferred Stock. Further, the holders of the Series D Preferred Stock are entitled to vote with all holders of the Common Stock on an asIn January 2022, GHS converted ~~or as exercised basis.~~45

The Series D COD provides for conversion price adjustments in the event of stock dividends, stock splits and similar transactions. It also provides for certain adjustments in connection with subsequent rights offerings, pro rata distributions to holders of our Common Stock and fundamental transactions. Additionally, from the date of the SPA until the date when the holder no longer holds any Series D Preferred Stock, upon any issuance by the Company or any of its subsidiaries of Common Stock or common stock equivalents (as defined in the Series D COD) for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), ~~the holder may elect, in its sole discretion, to exchange (in lieu of conversion), if applicable, all or some of the~~ shares of Series D ~~Preferred Stock then held~~ preferred stock with a stated value of $54,000 for ~~any securities or units issued in a Subsequent Financing on a $1.00 for $1.00 basis.~~36,000,000

~~Following an “Event of Default” (as defined in the Series D COD), all outstanding~~ shares of ~~Series D Preferred Stock shall come immediately due for redemption and~~common stock at a conversion price of $0.0015 per share. As a result of the ~~redemption amount shall accrue interest at~~conversion, the ~~lesser of: (a) eighteen percent (18%) per annum; or (b)~~Company recorded a deemed dividend of $237,924, which is calculated as the ~~maximum legal rate. Redemption following an Event~~number of ~~Default shall occur at an amount equaling: 1.35~~shares of common stock issued multiplied by the ~~sum~~difference between the conversion price ($0.0015) and original fixed conversion price of the Stated Value, all accrued but unpaid dividends and all other amounts due pursuant to the Series D COD for all Series D Preferred Stock outstanding. Additionally, following an Event of Default, the Conversion Price shall equal the lower of: (a) the then applicable conversion price; or (b) a price per share equaling eighty percent (80%) of the lowest traded price for the Company’s Common Stock during the fifteen (15) trading days preceding the relevant conversion.$0.008109

The Series D Preferred Stock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitation (as defined in the Series D COD). However, as long as any shares of Series D Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series D Preferred Stock directly and/or indirectly (a) alter or change adversely the powers, preferences or rights given to the Series D Preferred Stock or alter or amend the Series D COD, (b) authorize or create any class of stock ranking as to redemption or distribution of assets upon a Liquidation (as defined in the Series D COD) senior to, or otherwise pari passu with, the Series D Preferred Stock or, authorize or create any class of stock ranking as to dividends senior to, or otherwise pari passu with, the Series D Preferred Stock, (c) amend its Articles of Incorporation or other charter documents in any manner that adversely affects any rights of the Holders (as defined in the Series D COD), (d) increase the number of authorized shares of Series D Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

~~Due to the mandatorily redeemable features, the Series D preferred stock was classified as a liability pursuant to ASC 480-10. The Company recorded a debt discount of $15,900, of which $3,256~~ was amortized to interest expense in the three months ended June 30, 2021. The Company also determined that the conversion option represented a beneficial conversion feature, however calculated the fair value of this feature to be negligible.

As of ~~June 30,~~March 31, 2022, there were 1,005 shares of Series D preferred stock outstanding, and $75,664 in accrued Series D dividends. As of December 31, 2021, ~~we had $9,159~~there were 1,050 shares of Series D preferred stock outstanding, and $52,944 in accrued Series D dividends.

Note 8.Stockholders’ Equity (Deficit)

Common Stock

In January 2022, GHS converted 45 shares of Series D preferred stock with a stated value of $54,000 for 36,000,000 shares of common stock at a conversion price of $0.0015 per share.

~~2021 Transactions~~

In February 2022, Auctus exercised warrants for 43,349,000 shares of common stock.

In March 2021, an aggregate of 140,000,000 shares of common stock were issued to the board members for accrued dividends as well as current compensation for the year ended December 31, 2021. Of these shares issuances, $961,666 is included in personnel costs in the consolidated statements of operations.

In March 2021, an aggregate of 31,834,386 shares of common stock were issued to employees and consultants for accrued and current consulting services for a total fair value of $236,448.

~~In June 2021, an aggregate of~~ ~~11,956,004~~ ~~shares of common stock were issued pursuant to conversion of balances owed to a related party and accrued consulting services totaling $204,364~~.

~~In June 2021, Auctus exercised~~ ~~30,887,276~~ ~~warrants into shares of common stock.~~

During the ~~six~~three months ended ~~June 30, 2021, Pride converted~~ ~~53,000~~ ~~shares of Series C preferred stock for~~ ~~53,000,000~~ ~~shares of common stock.~~

~~During the six months ended June 30,~~March 31, 2021, the Company issued ~~137,987,777~~37,538,998 shares of common stock pursuant to conversion of debentures in the principal amount of $~~495,247~~140,500.

~~2020 Transactions~~

~~In January 2020, we issued~~ ~~294,994~~ ~~shares of common stock to a bridge noteholder in connection with promissory notes received.~~

~~During the six months ended June 30, 2020, we issued an aggregate of~~ ~~10,052,318~~ ~~shares of common stock to consultants for 2019 services which were accrued at a fair value of $459,417~~.

~~In March 2020, we issued~~ ~~1,000,000~~ ~~shares to Orlando Reece pursuant to his appointment to the Board of Directors.~~

~~In May 2020, we issued an aggregate of~~ ~~11,942,161~~ ~~shares to directors as compensation.~~

~~In April 2020, we issued~~ ~~90,216~~ ~~shares and~~ ~~958,333~~ ~~shares of common stock to a Series B Preferred Stock investor for accrued dividends and conversion of~~ ~~25,000~~ ~~shares of the Series B Preferred Stock.~~

~~In May 2020, we issued an aggregate of~~ ~~12,889,267~~ ~~shares of common stock to executives, officers and consultants for services rendered for a total fair value of $139,215~~.

~~In June 2020, two option holders exercised their outstanding options for a total of~~ ~~4,000,000~~ ~~shares of common stock at an exercise price of $0.0026. The value of $10,400~~ ~~was converted from outstanding accounts payable.~~

~~During the six months ended June 30, 2020, we issued an aggregate of~~ ~~4,170,000~~ ~~shares of common stock to Pride Partners pursuant to warrant exercises. Refer to Note 9.~~

~~Series B Convertible Preferred Stock~~

~~As of June 30, 2021, we had $13,800~~ ~~in remaining accrued Series B dividends.~~

~~Series C Convertible Preferred Stock~~

~~During the quarter ended June 30, 2021, Pride converted~~ ~~53,000~~ ~~shares of Series C preferred stock for~~ ~~53,000,000~~ ~~shares of common stock. As of June 30, 2021, there were~~ ~~76,559~~ ~~shares of Series C preferred stock issued and outstanding.~~

Note 9. Options and Warrants

Options

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had ~~1,800,000~~0 options remaining outstanding pursuant to the 2012 Equity Incentive Plan.

~~There was~~ 0 ~~stock based compensation expense for options for the six months ended June 30, 2021 and 2020. There will be no additional compensation expense recognized in future periods.~~

Warrants

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had ~~204,946,057~~130,709,782 and ~~235,833,333~~174,058,782 warrants outstanding, respectively, with a weighted average exercise price of $0.01 and $0.02 per share. In ~~June 2021,~~February 2022, Auctus exercised ~~30,887,276~~43,349,000 warrants into shares of common stock.

Note 10. Related Party Transactions

Parties, which can be a corporation or an individual, are considered to be related if we have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

Notes Payable to Related Party

Notes payable to related parties at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020 totaled~~2021 included a note of $1,800 ~~and $17,885, respectively,~~ with a 2%2% annual interest rate. ~~In June 2021, the Company converted $16,085~~ ~~of a related party note payable into shares of common stock.~~

Currently the Company has defaulted on ~~all of their remaining related party loan obligations.~~this obligation. Forbearance has been granted by the related ~~parties on all loans.~~party.

In February 2022, the Company issued a promissory note to a related party for $70,000. The note is unsecured and matures in April 2022. The note does not bear interest. The note includes a promise to issue shares of the Company’s preferred stock, which was undetermined as of March 31, 2022.

Accrued Salaries and Compensation

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, accrued salaries to our company officers and executive director totaled $~~319,735~~522,804 and $~~299,732~~472,804, respectively, and is included in accrued salaries and consulting fees in our consolidated balance sheets.

In March 2021, we issued 200,000,000 shares of common stock to the Chief Operating Officer for a total fair value of $160,000.

Board of Directors

In March 2021, we issued 20,000,000 shares of common stock to each of the seven board members, including the Chief Executive Officer, for an aggregate of 140,000,000 shares. Of these share issuances, $961,666 is included in personnel costs in the consolidated statements of operations and the remaining $138,334 was converted from accrued salaries and consulting fees.

~~Total accrued directors’ compensation of $~~0 ~~and $94,584~~ ~~at June 30, 2021 and December 31, 2020, respectively, is included in accrued salaries and consulting fees on our consolidated balance sheets.~~

A former board member is the co-founder and president of ProcureAM, LLC, the fund advisor for the Fund. During 2021, we initially received $100,000 from ProcureAM and provided an additional $305,000 to the custodian. As of ~~June 30,~~December 31, 2021, we have recorded $305,000 in fund expenses and do not expect to receive any amounts back from ProcureAM. In the three months ended March 31, 2022, we recorded an additional $100,000 in fund expenses which we do not expect to receive any amounts back from ProcureAM. As such, other receivable was $0 on the consolidated balance sheets.

Accounts Payable

As of March 31, 2022 and December 31, ~~2020, we have~~2021, the Company had $~~305,000~~168,308 and $~~100,000~~102,808, respectively, included ~~as other receivables on our consolidated balance sheet, which represents amounts held~~ in ~~escrow at the Fund’s custodian.~~accounts payable to related parties including officers and board members.

Note 11. Subsequent Events

Management has evaluated all activity up to ~~August 16, 2021~~May 25, 2022 and concluded that no subsequent events have occurred that would require recognition in these financial statements or disclosure in the notes to these financial statements other than the following:

~~On July 6, 2021, the Board increased the size~~In April 2022, Advancing Equality Preference entered into a loan payable for $130,000 for proceeds of its Board from seven persons to nine persons and appointed Andrea Breanna to fill a vacant director position created thereby, effective immediately. At this time, Ms. Breanna has not been named to any committees of the Board.$100,000.

On July 13, 2021, we entered into a Securities Purchase Agreement (the “July SPA”) with GHS Investments, LLC (the “Purchaser”), a Nevada limited liability company, pursuant to which for a purchase price of $~~250,000~~,April 28, 2022, the ~~Purchaser purchased an additional two hundred~~Company effectuated the termination and ~~fifty (250) shares~~liquidation of the ~~Company’s Series D Convertible Preferred Stock (“Series D Preferred Stock”). Further, subject~~Fund pursuant to the terms of a Plan of Liquidation. As of this date, the Fund has ceased operations.

On April 15, 2022, Deborah Fuhr submitted her resignation as a member of the Board, effective immediately. Ms. Fuhr submitted her resignation to pursue other interests. The Company’s Board accepted Ms. Fuhr’s resignation and ~~conditions contained in~~expressed its appreciation for the ~~July SPA, on or prior~~services she provided to the thirtieth (30) calendar day following the initial Closing Date (as defined in the July SPA), the Company agrees to sell, and the Purchaser agrees to purchase an additional two hundred and fifty (250) shares of Preferred Stock at price of $Company.

~~1,000~~ per share of Preferred Stock. As previously reported on a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2021, we filed a Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Series D COD”) with the Delaware Secretary of State to create a new class of preferred stock, $~~0.001~~ ~~par value per share, designated Series D Convertible Preferred Stock and authorized the issuance of up to four hundred (400) shares of Series D Preferred Stock. On the April 9, 2021, all of the four hundred (400) shares of Series D Preferred Stock were issued to the Purchaser. The Series D Preferred Stock has a stated value of $1,200~~ ~~per share (“Stated Value”) and the holder of the Series D Preferred Stock has the right to receive a dividend equal to eight percent (~~8%) per annum, payable quarterly, beginning on the issuance date of the Series D Preferred Stock and ending on the date that Series D Preferred Share has been converted or redeemed. Dividends may be paid in cash or in shares of Series D Preferred Stock at the discretion of the Company. Further, the holders of the Series D Preferred Stock have the right to receive assets in the event of liquidation, dissolution or winding up before any distribution or payment shall be made to the holders of any securities junior to the Series D Preferred Stock.

1813

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”), including our unaudited condensed consolidated financial statements as of ~~June 30, 2021~~March 31, 2022 and for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ and the related notes. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “us,” “we,” “our,” and similar terms refer to LGBTQ Loyalty Holdings, Inc., a Delaware corporation. This discussion includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.

We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risk factors in Item 2.01 in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the Securities and Exchange Commission (the “SEC”) on April 15, ~~2021.~~2022. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Moreover, we operate in a very competitive changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and certainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

Business Overview

On January 25, 2019, we acquired LGBT Loyalty LLC, a New York limited liability company, with the goal of creating the first LGBTQ Loyalty Preference Index ETF (the “Index ETF”) to provide the LGBTQ community with the power to influence the allocation of capital within a financial Index ETF based upon LGBTQ consumer preferences. The Index ETF is intended to link the growing economic influence of the LGBTQ community and their allies with many of the top Fortune 500 companies that support and implement diversity, inclusion and equality policies within their organizations. The incorporation of diversity and inclusion in a company’s recruitment and human resource policies is becoming a key concern to investors as part of their growing focus on ESG allocations. Our data and analytics unequivocally reinforce that corporations that have embraced diversity and inclusion policies within their corporate culture perform at a higher level financially than their peers. This includes advancing a more invigorated workforce that attracts and retains the best talent. Innovation and agility have been identified as great benefits of diversity, and there is an increasing awareness of what has come to be known as ‘the power of difference’.

On October 30, 2019, through our wholly-owned subsidiary ~~Loyalty~~Advancing Equality Preference, ~~Index,~~ Inc. (“~~LPI”~~AEP”) and our strategically aligned partnerships with crowd sourced data and analytic providers, we launched the LGBTQ100 ESG Index which integrates LGBTQ community survey data into the methodology for a benchmark listing of the nation’s highest financially performing large-cap publicly listed corporations that our respondents believe are most committed to advancing equality. LPI is the index provider for the LGBTQ + ESG100 ETF; LGBTQ Loyalty was the Sponsor for the prospectus that was filed by the highly regarded licensed Fund Adviser ProcureAM, a wholly owned subsidiary of Procure Holdings, LLC., which is through our platform service agreement (“PSA”), and was approved by the Securities and Exchange Commission (“SEC”) in early January 2020. The LGBTQ + ESG100 ETF (the “Fund”) ~~seeks~~sought to track the investment results (before fees and expenses) of the LGBTQ100 ESG Index. The ~~LGBTQ + ESG100 ETF (the “Fund”) launched in May 2021 on the NASDAQ. The~~ Fund ~~seeks to track the investment results (before fees and expenses) of the LGBTQ100 ESG Index and earns~~earned management fees based on assets under management (“AUM”) and launched in Q3 - 2021 on the NASDAQ.

Fund Closure

LGBTQ Loyalty has generated an abundance of media coverage for our premier LGBTQ Index product with the launch and listing on NYSE of the LGBTQ100 ESG Index. The exclusive media launch with Bloomberg Media was instrumental in propelling the LGBTQ100 brand to center stage overnight in the financial sector. In addition, LGBTQ Loyalty was featured at the Inside ETFs Summit in early 2020 with Board Members, Barney Frank and Billy Bean speaking on the “The Power of Inclusion & Equality” for investors. Our media strategy objective is to lay the groundwork for additional high-profile positioning of the brand as we work to achieve the desired increased financial media coverage and growth in AUM valuation for our company and shareholders.

Our Products

Our mission is to build a sustainable and well recognized brand focused on unlocking the growing purchasing power of the LGTBQ community globally by offering a robust LGBTQ Index and core ETF portfolio that attracts key institutional investors and corporations.

At the nucleus of our LGBTQ Loyalty Preference Index is our partner-driven Crowd Preference Index Methodology (CPIM) which we believe disrupts ESG investing. This is achieved through an elevated screening process of financial performance data and ESG standards and practices, whereby LGBTQ community data on diversity and inclusion compliance directly impacts corporate financial results and transparently identifies and recognizes high performance companies who have consistently outperformed the S&P 500 index or equivalent sector standards and norms.

We intend to extend the LGBTQ Loyalty Index brand with future plans to develop indices with a focus on the ‘Social’ component of ESG utilizing our proprietary financial slogan of “Advancing Equality” within other gender, minority interest groups.

Revenue

The Company focus ~~in 2019 and 2020~~over the past few years was to create and launch our first of many financial Index products through an equality driven thematic ESG screened and alpha performance benchmark. The Company achieved this through its LGBTQ100 ESG Index listing and performance on the NYSE starting on October 30, 2019. In ~~2020~~2022 our collective efforts and focus is to monetize and scale our model by capturing recurring revenue streams through our current financial Index product. Our goal is to accelerate our revenue pursuits through our partnership and licensed relationships to achieve a break-even point when we have secured AUM benchmarked against the LGBTQ100 Index in excess of $50,000,000.

We intend to introduce a new key partnered revenue source derived from Direct Index Licensing Fees generated by financial institutions and asset management companies for creating a product (e.g., Index Funds, Structured Financial Products, Turnkey Asset Management Providers) based on or linked to the LGBTQ100 index. This includes fees to use the LGBTQ100 index to track the performance of funds or as benchmarks for actively managed portfolios. We plan to capture Data Subscriptions which could provide recurring subscription revenue from our LGBTQ Index. This includes ongoing and historical data and information generated by our wholly owned division Advancing Equality Preference Inc., and through our strategic partnerships for new potential financial equality-driven Indices.

New initiatives in ~~2021~~2022 include a plan to create ancillary revenue streams to complement and support this unique platform for the top 100 Equality driven Corporations in America represented in the LGBTQ100 Index. We believe our index will reward and elevate the status of those corporations that have adopted diversity and inclusion best practices, cared for their employees and positively impacted LGBTQ communities. Expert LGBTQ economists have repeatedly stressed the value of the LGBTQ brand loyalty to corporations. We consider the companies that best capture the spending trends and loyalty of the LGBTQ consumer will be better positioned for financial growth and success. Given the opportunity to link to the power and status generated between the LGBTQ community, these companies and their own workforce, we will launch a Partner Loyalty Program which includes benefits afforded to defined sponsorship tiers. The LGBTQ Loyalty Sponsorship is designed to attract the significant marketing dollars Fortune 500 companies are allocating to D&I programs with an opportunity to purchase LGBTQ Loyalty Sponsorship packages, including participation and brand exposure at planned conferences and events. Companies will be offered the opportunity to purchase LGBTQ Loyalty Sponsorship packages starting in Q4-2021.

Our initial investments in creating a high performing product with a well-recognized brand have been established. As we begin to move into planning for the post-COVID-19 world, we will now shift our efforts to cultivate new revenue stream opportunities while building AUM as we construct a profitable business platform.

We have achieved no revenues to date from our LGBTQ related operations and have been focused on building our product and achieving performance results and media branding over the course of the past twelve months. There are no assurances that can be given that we will achieve revenues or profitability in the future.

Business Strategy

Our business strategy is targeted to the estimated three trillion-dollar global purchasing power of the LGBTQ consumer demographic. More than nineteen million people identify themselves as LGBTQ in the US and four-hundred-fifty million globally while the LGBTQ community is composed of some of the most loyalty-driven consumers in the world.

We believe that the LGBTQ demographic is one of the most highly sought-after economic groups in the world from corporate America down to the local business owner because of their higher median income and brand loyalty. What makes targeting and supporting this dynamic demographic even more extraordinary and rewarding is that friends, family, employers, employees, teachers, coaches and fans of our community so loyally support the brands, products and services that in turn support us. We further believe that this loyalty across the board is time tested, proven, growing and expanding and ultimately extremely rewarding to all that are embraced by the LGBTQ community. Connecting the world’s most supportive LGBTQ companies to the dynamic, loyal and ever-increasing spending power of the LGBTQ community is a consequential step forward for the LGBTQ movement and investment community.

Many Fortune 500 companies are directing more of their consumer advertising and promotional spend towards celebrating diversity and equality. Our long-term goal is to reinforce the financial performance of those Corporations as they foster and integrate LGBTQ equality practices through their Diversity and Inclusion policies as a cornerstone of their corporate culture. Our LGBTQ100 Index of the top 100 corporate constituents have already embraced and enacted this standard of Equality excellence. See our top LGBTQ100 Index constituents on our website.

Critical Accounting Policies and Estimates

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplates our continuation as a going concern. We have incurred losses to date of ~~$18,611,658~~$20,624,459 and have negative working capital of ~~$6,286,415~~$6,861,277 as of ~~June 30, 2021.~~March 31, 2022. To date we have funded our operations through advances from a related party, ~~issuance~~issuances of convertible debt, and the sale of ~~our~~ common ~~stock.~~stock, preferred stock and warrants. We intend to raise additional funding through third party equity or debt financing. There is no certainty that funding will be available as needed. These factors raise substantial doubt about our ability to continue operating as a going concern. Our ability to continue our operations as a going concern, realize the carrying value of our assets, and discharge our liabilities in the normal course of business is dependent upon our ability to raise capital sufficient to fund our commitments and ongoing losses, and ultimately generate profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Use of Estimates

Derivative Financial Instruments:

The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has a sequencing policy regarding share settlement wherein instruments with a fixed conversion price or floor would be settled first, and interest payable in shares settle next. Thereafter, share settlement order is based on instrument issuance date – earlier dated instruments settling before later dated. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. The policy includes all shares issuable pursuant to debenture and preferred stock instruments as well as shares issuable under service and employment contracts and interest on short term loans.

Results of Operations

Three months ended ~~June 30, 2021~~March 31, 2022 compared with the three months ended ~~June 30, 2020~~March 31, 2021

There were no revenues during the three months ended ~~June 30, 2021~~March 31, 2022 or ~~2020.~~2021.

The following is a breakdown of our operating expenses for the three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

	Three Months Ended										Three Months Ended
	June 30,										March 31,
	2021		2020		Change $			Change %			2022		2021		Change $			Change %
Personnel costs	$	93,121	$	284,507	$	(191,386	)		-67	%	$	113,994	$	1,295,998	$	(1,182,004	)		-91	%
Consulting fees		38,500		93,515		(55,015	)		-59	%		15,250		33,000		(17,750	)		-54	%
Legal and professional fees		153,527		95,347		58,181			61	%		156,793		105,123		51,670			49	%
Fund expenses												100,000		-		100,000			100	%
Sales and marketing		40,500		45		40,455			89840	%		27,702		-		27,702			100	%
General and administrative		28,392		20,736		7,655			37	%		36,317		28,123		8,194			29	%
Depreciation and amortization		6,448		6,448		-			0	%		6,448		6,448		-			0	%
	$	360,488	$	500,598	$	(140,110	)		-28	%	$	456,504	$	1,468,692	$	(1,012,188	)		-69	%

Personnel costs include officer salaries and directors’ compensation. The decrease ~~in personnel costs is primarily due to stock compensation to the board and executives in 2020.~~

Consulting fees decreased by $55,015 during the three months ended June 30, 2021, primarily due to limited operations in developing the Index in 2021. Consulting fees represent our efforts to launch the LGBTQ100 ESG Index and LGBTQ + ESG100 ETF.

~~Legal and professional fees increased by $58,181, primarily due to increased legal costs pertaining to our financing activities.~~

~~Sales and marketing costs were $40,500 in the three months ended June 30, 2021 as we began our marketing efforts over the launch of the ETF.~~

~~General and administrative expenses increased by $7,655 in 2021 due to increased operations surrounding the ETF launch.~~

~~Depreciation and amortization expense was $6,448 in the three months ended June 30, 2021, which represents amortization on our index development costs.~~

~~The following is a breakdown of our other income (expenses) for the three months ended June 30, 2021 and 2020:~~

Three Months Ended
June 30,
2021 2020 Change $ Change %
Interest expense $ (727,642 ) $ (376,473 ) (351,169 ) 93 %
Other income - 3,000 (3,000 ) -100 %
Change in derivative liability (2,658,949 ) 442,626 (3,101,576 ) -701 %
$ (3,386,591 ) $ 69,154 $ (3,455,745 ) -4997 %

Interest expense increased by $351,169 in the three months ended June 30, 2021, primarily attributable to origination interest and amortization of debt discount of the newly issued and converted debentures.

~~Change in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.~~

~~Net loss was $3,747,079 and $431,445 for the three months ended June 30, 2021 and 2020, respectively.~~

~~Results of Operations~~

~~Six months ended June 30, 2021 compared with the six months ended June 30, 2020~~

~~There were no revenues during the three months ended June 30, 2021 and $560 in revenue for 2020.~~

~~The following is a breakdown of our operating expenses for the six months ended June 30, 2021 and 2020:~~

Six Months Ended
June 30,
2021 2020 Change $ Change %
Personnel costs $ 1,389,121 $ 499,462 $ 889,653 178 %
Consulting fees 71,500 168,015 (96,515 ) -57 %
Legal and professional fees 258,650 222,342 36,308 16 %
Sales and marketing 40,500 7,590 32,910 434 %
General and administrative 56,514 70,728 (14,214 ) -20 %
Depreciation and amortization 12,896 12,896 - 0 %
$ 1,829,181 $ 981,033 $ 848,148 86 %

~~Personnel costs include officer salaries and directors’ compensation. The increase~~ in personnel costs is primarily due to $1,141,666 in stock compensation for shares issued to the board and executives in March 2021.

Consulting fees decreased by ~~$96,515~~$17,750 during the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to limited operations in developing the Index. Consulting fees represent our efforts to launch the LGBTQ100 ESG Index ~~in 2021.~~and LGBTQ + ESG100 ETF.

Legal and professional fees increased by ~~$36,308,~~$51,670, primarily due to increased legal costs ~~in 2021~~ pertaining to our financing ~~activities.~~activities and the Fund closure.

Sales and marketing costs increased by ~~$32,910~~$27,702 in ~~202~~the three months ended March 31, 2022 as we ~~began~~ramped up our ~~marketing efforts over the launch of the ETF.~~branding efforts.

General and administrative expenses ~~decreased~~increased by ~~$14,214 due to our cost cutting measures~~$8,194 in ~~our operations.~~2022.

Depreciation and amortization expense was ~~$12,986~~$6,448 in the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, which represents amortization on our index development costs.

The following is a breakdown of our other income (expenses) for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Six Months Ended
June 30,
2021 2020 Change $ Change %
Interest expense $ (1,289,328 ) $ (737,312 ) (552,016 ) 75 %
Other income - 3,000 (3,000 ) -100 %
Change in derivative liability (2,245,976 ) 324,872 (2,570,848 ) -791 %
$ (3,535,304 ) $ (409,440 ) $ (3,125,864 ) 763 %

	Three Months Ended
	March 31,
	2021			2020			Change $			Change %
Interest expense	$	(106,127	)	$	(561,687	)	$	455,560			-81	%
Change in derivative liability		(359,188	)		412,974			(772,162	)		-187	%
	$	(465,315	)	$	(148,713	)	$	(316,602	)		213	%

Interest expense ~~increased by $552,016 in the six months ended June 30, 2021,~~is primarily attributable to origination interest and amortization of debt ~~discount of the newly issued and converted debentures.~~discount.

Change in derivative liability includes the mark-to-market adjustment of the derivative liability in connection with our convertible debenture.

Net loss was ~~$5,364,485~~$921,819 and ~~$1,389,913~~$1,617,405 for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Liquidity and Capital Resources

Historically, we have been financed through advances from related parties, issuances of convertible debt, and the sale of our common and preferred stock. Our existing sources of liquidity will not be sufficient for us to implement our business plans. There are no assurances that we will be able to raise additional capital as and when needed. As of ~~June 30, 2021,~~March 31, 2022, we had ~~$179,192~~$3,077 of cash on hand. Based on our current planned expenditures, we will require approximately $2.5 million over the next 12 months. Our existing sources of liquidity may not be sufficient for us to implement our continuing business plan. Our need for future capital will be dependent upon the speed at which we expand our product offerings. There are no assurances that we will be able raise additional capital as and when needed.

As of ~~June 30, 2021,~~March 31, 2022, we had a working capital deficit of ~~$6,863,770~~$6,861,277 as compared to a working capital deficit of ~~$5,338,865~~$7,001,879 at December 31, ~~2020.~~2021.

During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ operations used cash of ~~$519,220~~$145,271 and ~~$727,216,~~$159,256, respectively, primarily related to our net loss partially offset by non-cash charges and cash provided by changes in operating assets and liabilities.

~~During the six months ended June 30, 2021 and 2020, net cash used~~In 2022, we received $70,000 in investing activities was $205,000 and $31,000, respectively. Cash used in 2021 pertains to the net funds provided to the Fund’s custodian for the ETF launch. Cash used in 2020 is attributable to capitalized costs pertaining to the development of the LGBTQ100 ESG Index and ETF website.proceeds from a related party note.

In 2021, we received ~~$300,000~~$150,000 in proceeds from the issuance of ~~three~~two convertible debentures and repaid notes payable of ~~$1,000. We also received net proceeds of $574,100 from the issuance of Series D preferred stock.~~$500. From February to March 2020, we received $175,000 in proceeds from the issuance of two convertible debentures. In January 2020, we received $47,500 pursuant to a bridge note agreement. We also received $93,343 from the exercise of warrants.

We will continue to seek out additional capital in the form of debt or equity under the most favorable terms we can find.

The Company is currently, and has for some time, been in financial distress. It has no cash resources ~~and~~or current assets, and has no ongoing source of revenue. Management is continuing to address numerous aspects of the Company’s operations and obligations, including, without limitation, debt obligations, financing requirements, and regulatory compliance, and has taken steps to continue to raise new debt and equity capital to fund the Company’s business activities.

The Company is continuing its efforts to raise additional capital in order to be able to pay its liabilities and fund its business activities on a going forward basis and regularly evaluates various measures to satisfy the Company’s liquidity needs. Though the Company actively pursues opportunities to finance its operations through external sources of debt and equity financing, there can be no assurance that such financing will be available on terms acceptable to the Company, or at all.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective due to a lack of audit committee and segregation of duties caused by limited personnel to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Management believes that the material weakness set forth above did not have an effect on our financial results.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the three months ended ~~June 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no pending, nor to our knowledge threatened, legal proceedings against us.

ITEM 1A. RISK FACTORS

As of the date of this filing, there have been no material changes to the Risk Factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC on April 15, ~~2021,~~2022, which may be accessed via EDGAR through the Internet at www.sec.gov (the “2020 Form 10-K”). The Risk Factors set forth in the ~~2020~~2021 Form 10-K should be read carefully in connection with evaluating the Company’s business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in the ~~2020~~2021 Form 10-K could materially adversely affect the Company’s business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks that the Company faces. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

~~On July 13, 2021,~~Refer to the ~~Company issued 250 shares~~footnotes of ~~Series D Preferred Stock to GHS Investments, LLC pursuant to a Securities Purchase Agreement~~the accompanying consolidated financial statements for ~~net proceeds~~convertible debentures entered into and issuances of ~~$237,500.~~common and preferred stock.

~~Other than what has previously been disclosed in public filings, there are no new sales of unregistered securities.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

We are in default under a $20,000 Promissory Note dated May 20, 2017 that became due on August 31, 2017. We have entered into a payment plan with the payee thereunder wherein we are making monthly cash payments to reduce the outstanding balance due. At ~~June 30, 2021~~March 31, 2022 the outstanding balance was approximately $1,986.

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable.

ITEM 5. OTHER INFORMATION

~~None.~~On April 15, 2022, Deborah Fuhr submitted her resignation as a member of the Board, effective immediately. Ms. Fuhr submitted her resignation to pursue other interests. The Company’s Board accepted Ms. Fuhr’s resignation and expressed its appreciation for the services she provided to the Company.

ITEM 6. EXHIBITS

Exhibit Number		Description of Exhibit
31.1*		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
~~31.2~~31.2*		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**		Inline XBRL Instance Document
101.SCH**		Inline XBRL Taxonomy Extension Schema Document
101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Filed herewith
**	This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

2720

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LGBTQ LOYALTY HOLDINGS, INC.

~~August 16, 2021~~May 25, 2022	By:	/s/ Robert A. Blair
		Robert A. Blair, Chief Executive Officer

~~August 16, 2021~~May 25, 2022	By:	/s/ Eric Sherb
		Eric Sherb, Chief Financial Officer

2821

	Convertible
	Debenture
Balance as of December 31, 2020	$	1,661,520
Issuance of convertible debenture - principal amount		341,825
Issuance of convertible debenture - debt discount and original issue discount		(341,825	)
Amortization of debt discount and original issue discount		582,631
Conversion to common stock, net of discount		(346,874	)
Balance as of June 30, 2021	$	1,897,277

	Derivative
	Liability
Balance as of December 31, 2020	$	1,930,235
Initial fair value on issuance of convertible debenture		760,740
Conversion of debenture to common stock		(1,782,577	)
Change in fair value of derivative liability		2,245,976
Balance as of June 30, 2021	$	3,154,374